N.H. businesses discuss impact of Trump tariffs on Canadian lumber

New Hampshire lumberyards and logging companies say there’s no clear-cut answer on how new tariffs placed on Canadian softwood lumber will impact their businesses. But they agree that it’ll eventually mean higher costs for customers, especially those buying newly built homes.

The U.S. Commerce Department this week determined that Canada has been subsidizing its softwood lumber industry. To counteract those subsidies, the Commerce Department said it will impose tariffs between 3 and 24 percent on softwood lumber entering the United States from Canada starting next week. The Canadian government has called the allegations “baseless and unfounded,” and the duties “unfair and punitive.”

Almost everything on the outside of most people’s homes and the inside of their walls – the rafters, frames, roofing, siding, even the sheetwall – are made from softwood products, according to Tom Montgomery, general manager for Belletetes’s A&B Lumber Co., a building supply business in Pembroke. He said 80 percent of the company’s product is milled softwoods, the majority of which come from Canada.

Currently, A&B Lumber sells eastern spruce – the main type of softwood the company sells – at 44 cents per foot, with a two-by-four selling at $3.55, Montgomery said. Prices have been rising since the beginning of the year once it became clear a new trade agreement would not be reached in October, according to Montgomery.

Pricing might not change right away, he said, depending on how much stock the industry is sitting on. He said if lumberyards pre-bought lumber when prices were low, it could take some time before that inventory is used up and suppliers are forced to buy new product.

“The challenge for our members becomes when to buy, when not to buy, how much inventory to sit on,” said Ashley Ranslow, director of government affairs for the Northeastern Retail Lumber Association. “It really becomes a game like that.”

Rachel Eames, owner and broker of the Concord-based agency Eames Realty Services and the president of the New Hampshire Association of Realtors, said the amount of new home construction in the state is well below what the population needs.

To meet demand, she said, “We’d be building about five times more than what we are now. ... We don’t have enough builders building homes.”

According to the National Association of Home Builders, it takes about 15,000 board feet to build a typical single-family home, and the lumber price increase in the first quarter of this year has added almost $3,600 to the price of a new home. The organization has denounced the Commerce Department’s decision, saying it will harm American home buyers, consumers and businesses while failing to resolve the underlying trade dispute between the two nations.

It remains unclear how the tariffs could affect the logging industry, which has a long-standing practice of shipping logs across the Canadian border for lumber processing, according to New Hampshire Timberland Owners Association’s Executive Director Jasen Stock.

Very little raw timber comes into the state from Canada, Stock said, but a large percentage of New Hampshire’s logs – 55.3 million of the 115 million board feet of logs the state produced in 2014 – go up to Canada to be processed into lumber. Stock said for many loggers, especially those in the far northern reaches of the state, Canada is the closest market for raw timber processing.

Once Canadian sawmills buy the New Hampshire logs, they can turn them into lumber at a far lower cost than at American sawmills because of government subsidies, Stock said. Those cheaper boards, now considered Canadian lumber, are then sold in the American market.

Canadians can make even more money on the lumber if the U.S. dollar is stronger than the Canadian dollar, Stock said. The Canadian dollar dropped 29 cents on Tuesday, closing at 73.72 U.S. cents. That represents the lowest point the Canadian dollar has been against the U.S. dollar since February 2016.

For Brian Dorman of WD Dorman & Son Excavating, selling logs to Canada just makes sense. His family-owned Pittsburg excavating and logging company is less than 10 miles from Marcel Lauzon Inc., a big softwood mill not 2 miles across the Canadian border.

In contrast, the closest domestic softwood pulp mills are in Jay, Maine, which Stock said would mean an eight-hour round trip for his trucks.

Jean-Pierre Rioux, the vice president and controller of Marcel Lauzon, said the Canadian company will hold off on making any business changes until June, once it knows how much it will be taxed. Typically, the mill’s proximity to the border has allowed it be treated as a U.S. mill, exempt from tariffs. If they are taxed, Rioux expects the company would apply for a tariff exemption in January 2018.

If they are affected by the tariffs and cannot get an exemption, Rioux said he wasn’t sure what would happen.

The company gets 70 percent of its timber from New Hampshire and Vermont and sells most of its lumber in New England. The mill dropped its production from five days to four days in November, when the U.S. Lumber Coalition filed a countervailing and anti-dumping duty petition against Canadian lumber importers, because of a sense that there was too much lumber in the market.

If the tax rate is high in June, Rioux said, production time may drop from four days to three, which would have an affect on the U.S. loggers he works with.

Rioux also pushed back against the idea of the Canadian lumber industry being subsidized by the government. He said Canadian lumber producers have an advantage because of the exchange rate, and they have access to government-owned forests. Those trees are cheaper to log than U.S. forests, the majority of which are privately owned, according to Rioux, mainly because of the exchange rate.

Dorman was unsure how the tariffs would affect his business, but he was willing to bet there would be some sort of trickle-down effect.

“As a logger, we sell the raw material, and the Canadians buy it at weight,” he said. “If it’s going to cost them more to produce it, I’m sure they’ll be looking to buy it at a cheaper rate.”

(The Associated Press contributed to this report. Caitlin Andrews can be reached at 369-3309, candrews@cmonitor.com or on Twitter at @ActualCAndrews.)